Risk and Technology Case Study

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Page 1Risk and Technology Case Study Part (a) v3Assessment 2Case studyEmerging risks board paperBackground informationA small hotel chain, Clean Hotels Limited (Clean Hotels), operates in Australia, New Zealand, and the United Kingdomin the following locations:• Sydney, Australia• Melbourne, Australia• Auckland, New Zealand• Edinburgh, Scotland• Glasgow, Scotland• Liverpool, England• Brighton, England.Clean Hotels operates mid-tier hotels that cater to families, couples, friends, and some business travellers. Thebusiness directly invests in good quality, freehold properties in key locations in the cities in which it operates.Clean Hotels has experienced strong revenue growth and has expanded over the last few years. Recent events havecaused a reduction in revenue and, therefore, profitability; however, it has managed to remain sustainable. CleanHotels’ strategy of acquiring hotels and freehold land has ensured it maintains control over all aspects of the hoteloperation; however, it does mean the business is highly leveraged.The hotel industry generally operates on tight margins, therefore changes in cost structure can have a major impact onhotel operations and services; when fixed costs change, only variable costs linked to customer service can be adjusted.Clean Hotels is considered a niche hotel chain; its focus market is non-business travellers looking to stay in majorcities. The business competes with similar niche hotels, as well as larger hotel chains. Many customers are pricesensitive, but are still looking for a personalised touch and a high standard of customer service. Competitors useautomated processes and have introduced emerging technologies to enable higher levels of service to be provided,while still maintaining cost control to ensure rates remain competitive.Additional informationTechnologyClean Hotels believes that, since it has introduced change effectively in recent times, by integrating hotels into thegroup, any introduction of new technology could also be implemented effectively.However, where new technology has been introduced in the past, implementation has generally been late and overbudget. At times, it has not met the needs of the business. The IT department has no clear policy on how newtechnology should be implemented, or what direction the business should take with technology, apart from the strategicpriority identified by the board (see below).Page 2Risk and Technology Case Study Part (a) v3Reputation managementAs a niche hotel chain, Clean Hotels values its reputation and seeks to maintain this reputation by delivering on itsstrategy, while still operating its business within broader societal expectations.1. Clean Hotels aims to be carbon neutral through the acquisition of renewable energy products and considering itscarbon footprint in all decisions. The business believes this is a key element when creating authentic customerexperiences and relationships, which is one of the strategic objectives noted by the board (see below).2. Clean Hotels also understands its reputation is reliant on employee satisfaction and engagement, and that a keydriver of employee engagement is wellbeing, health and safety. The business considers itself to be compliant with allkey requirements; unfortunately, a recent increase in incidents has caused concern. Following investigations ofincidents resulting in injury, it has become clear that many were avoidable as similar near miss events had occurredin the past. Near misses are reported to supervisors, and each supervisor has their own process for tracking andreporting near misses and incidents; they are rarely shared between departments.3. The board believes a strong risk culture is required to deliver on its strategies and that risk culture starts at the top, iethe board. The board includes experienced professionals, however a board gap analysis identified that the CFOmanages legal risks, as opposed to a general counsel, and uses several legal firms for ad hoc matters.4. The board believes introducing a whistleblowing policy and improving risk management systems are key to improvingthe risk culture and delivering on its strategies.The boardThe board consists of the Chairperson, Chief Executive Officer (CEO), Chief Financial Officer (CFO (and BoardSecretary)) and four independent non-executive directors. The board members are responsible for strategy,performance, people and risk. Their top strategic objectives are:1. to innovate and grow the Clean Hotels brand through the acquisition of additional hotels in current markets2. to create authentic customer experiences and relationships3. to integrate emerging technologies to improve value for Clean Hotels and improve the overall customer experience.The Board has recently implemented a risk and audit committee, which includes three independent non-executivedirectors, one of which is the chairperson.The board has prepared its risk appetite statement (RAS), which has been communicated through the Annual Report:‘The board is responsible for setting the risk appetite for achieving Clean Hotels’ strategic objectives. The riskappetite is cascaded down through business goals and objectives, the employee code of conduct, and the formaldelegation of authority policy, including the governance structure of approval committees, decisions made and theallocation of resources.’Risk and audit committeeAt the first risk and audit committee meeting, there were two agenda items:1. The CFO was asked to present the RAS, risk register and risk matrix of the key business risks for the committee’sconsideration at the next meeting.2. At a recent board meeting, it was noted that one of the board members attended a presentation from an internet ofthings (IoT) vendor (software supplier). The vendor, Biz4intellia (see https://www.biz4intellia.com/iot-in-hospitality/) isplanning to expand into Australia, Asia and the United Kingdom. The presentation was impressive, and the boardmember believes that the software could help the Clean Hotels chain achieve its three strategic objectives andmanage principal risks. The other board members are not convinced and have asked the risk and audit committee toconsider the benefits of introducing Biz4intellia and the impacts on Clean Hotels’ risk management process.Page 3Risk and Technology Case Study Part (a) v3At the second risk and audit committee meeting, the following was noted:1. The CFO presented the work to date to the risk and audit committee in a paper. An extract from the paper is attachedand shows the current RAS and risk register.2. The risk and audit committee reviewed the paper; while it is a good start, it appears the risk management processrequires some further work. The CFO advised that he does not have time to complete the requirements.3. The CFO agreed to consider how the introduction of Biz4intellia would impact Clean Hotels, as well as its riskmanagement process, at the next risk and audit committee meeting.4. Committee members discussed several articles relating to technology implementation and the importance of cybersecurity they had come across recently and asked that these be considered.• https://www.cyberscoop.com/sabre-corp-data-breach-settlement/• https://www.forbes.com/sites/forbestechcouncil/2021/01/11/four-reasons-why-new-tech-fails-and-how-to-avoidthese-pitfalls/?sh=669fecb05b1f• https://www.business2community.com/digital-marketing/digital-transformations-and-why-businesses-fail-toimplement-them-properly-02376009The following was recorded in the committee minutes:‘MotionThat the risk and audit committee receive the paper and engage an external consultant to:• review the risk register and make any recommendations to ensure the risk register aligns with the RAS and that bothinclude all key business risks• assess the Biz4intellia solution as proposed by the Board and how the introduction of Biz4intellia would impact theexisting risk management process.Both are to be presented at the next risk and audit committee meeting in the form of a board paper.The motion was unanimously agreed.’Page 4Risk and Technology Case Study Part (a) v3
Your taskYou are an external consultant and the CFO has asked you to produce a report for Clean Hotels’ risk and auditcommittee. The report should be evidence-based using credible sources, and no more than 1,000 words.Clean Hotels has advised that where risks and controls are listed, they should be assumed to be effective. Riskassessment of likelihood and impact is also deemed to be correct based on the controls in place. However, CleanHotels does not believe all its strategic objectives are included in the risk register.Some resources that could be used in the paper are listed below. You can also use other resources. Any sourcesused in the paper need to be appropriately referenced.1. Kansakar, P., Munir, A. and Shabani, N., 2019. ‘Technology in the hospitality industry: Prospects andchallenges’, IEEE Consumer Electronics Magazine, vol. 8, no. 3, pp.60-65.2. IoT Alliance Australia Resources: https://iot.org.au/resources/
RequirementsThe CFO requires you to focus on the following items in your report:1. Evaluate the current risk management for Clean Hotels (excluding Biz4intellia):a) Identify where the RAS is misaligned with the risk register and make relevant recommendations to the riskand audit committee.b) Considering Clean Hotels’ strategic objectives, assess which risk category is missing from the RAS and riskregister. Recommend four steps management should take to include the identified risk in the riskmanagement process.2. For the proposed Biz4intellia solution:a) Evaluate how introducing the Biz4intellia IoT solution will increase or decrease the residual risk rating for onerelevant risk listed in the risk register.b) Previous Clean Hotels projects have not been well managed due to poor risk identification and management.For each of the following project risk categories, evaluate one key risk and one potential mitigation strategy (forthe selected risk) that Clean Hotels should consider for the project implementation of the Biz4intellia IoTsolution:i. project scope – what needs to be achieved to deliver the projectii. project schedule – what needs to be done, which resources must be utilised, and when the project isdueiii. project cost – total funds needed to monetarily cover and complete the project scopeiv. customer acceptance – the extent to which a consumer will use a certain innovationv. staff acceptance – employee acceptance of the strategic objectives and goalsvi. information technology (IT) – management of increased cyber security risks and ensuring access toappropriate technology.c) Continuing on from the customer acceptance section in b) above, evaluate one relevant ethical issue tobe considered, and explain why this issue is important to Clean Hotels.

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